The new proposal for a $10 tax per barrel of oil, phased in over a five-year period, would put $20 billion towards modernizing America’s transportation system, one that Obama envisions is centered on efficient public transit like high-speed rail. Another $10 billion would incentivize state and local investment in infrastructure projects.
Let’s get the obvious out of the way: Obama’s idea has no chance of becoming a reality. Not only does he have to get it through the Republican Congress, but also sell it to many Democrats who probably aren’t interested, either. Obama’s threatening some of the most powerful and profitable corporations in the world with the t-word, but a tax on oil companies, if not devised properly, also risks passing down the costs to low-income consumers. Big Oil has maintained its federal subsides for over a century using just this argument.
Given that a tax on oil is purely hypothetical, Politico’s Michael Grunwald writes that Obama’s strategy here is to “jump-start a conversation about the future of transportation.”
But if there was ever a good time for the nation to have that conversation, it’s now, with the cost of oil at $30 per barrel. If the price of oil fairly factored in climate change and air pollution, then the price would be much higher. Since we don’t have a tax on carbon to account for this, a tax on oil could help do the trick.